From: Stevens & Lee
Dear Mr. Katz:
We have a small company that may offer to sell a class of securities to under 300 shareholders in connection with an acquisition that it intends to make, which results in the following sequence of events:
However, the duty to file under Section 15(d) is automatically suspended after the fiscal year within which the company's registration statement became effective because the class of securities will be held of record by less than 300 persons, which means the company will be required to file only one annual report.
The Commission is currently considering ways in which the Sarbanes-Oxley Act of 2002 adversely affects small businesses and steps it can take to mitigate these effects. We submit that the foregoing example is a situation where Commission action granting relief is appropriate. Compliance with Section 404 of the Sarbanes-Oxley Act of 2002 creates significant costs and burdens for companies, especially for smaller public companies which are required to file only one annual report. We think the costs and burdens of complying with Section 404 adversely affect the small public companies and will probably deter some smaller companies from capital markets transactions. Our client may well conclude that the costs and burdens of Section 404 compliance outweighs the benefit of the potential acquisition. Therefore, we respectfully ask the Commission to consider granting relief from having to comply with Section 404 for companies which are only required to file reports because of the application of Section 15(d).
Very truly yours,
Vicki W. Li